Subprime lenders boost used-car loans

Finance managers looking to help customers finance used-car sales should start having an easier time of it now that subprime lenders such as AmeriCredit Inc. and Wells Fargo Dealer Services are increasing their originations of new loans.

AmeriCredit reported last week it originated $624 million dollars in new loans in the first three months of this year, nearly triple the level of the year-ago quarter and up about 65 percent from the fourth quarter of 2009.

"Their biggest issue is liquidity," says Henry Coffey Jr., an analyst for Stern, Agee & Leach Inc. in Nashville. "Now that they've got some liquidity, AmeriCredit can get back on its horse and start re-growing its book [of loans] again," he says.

Kyle Birch, executive vice president for dealer services at AmeriCredit in Fort Worth, Texas, said in a phone interview that the subprime auto lender is looking to increase its business in just about every market. However, he said there are some areas, such as Nevada, Arizona and southern Florida, that have been slower to recover compared with the rest of the country.

AmeriCredit has more money to lend largely because of a comeback in the market for securitized assets. That's where an auto lender in effect sells off a bundle of loans and uses the money to originate new loans.

That market dried up in 2008 and early 2009, but it has started to come back. AmeriCredit sold two securitized deals in the first three months of this year, one for $600 million and one for $200 million, the company said.

Wells Fargo, which as a bank subsidiary can rely on deposits to finance itself, recently reported its total outstanding loans increased 13 percent in the first quarter of this year to more than $36 billion vs. the end of the fourth quarter 2009. That's not counting some legacy loans from recent merger deals. That amount is shrinking as the loans are repaid.

Through its acquisition of Wachovia Dealers Services last year, Wells Fargo became the nation's largest used-car lender, according to Experian Automotive.

AmeriCredit still has a lot of rebuilding to do. Its total outstanding loans as of March 31 were about $8.2 billion, down from $13 billion at the end of 2008.

"Today we want to do more in all markets compared to three months, six months, eight months, a year ago," Birch said. "It's safe to say we have increased originations in every market."

You can reach Jim Henry at